Vietnam fuel group says customers should cough up for environment tax hike

An employee pumps petrol for clients at a petrol station in Hanoi. Photo by Reuters/Kham

But a former trade official warns tax hikes will draw 'reactions' from consumers and might affect consumption.

Vietnamese consumers should foot the bill for a higher environment tax in order to sustain the state's income from fuel, a senior Vietnam Petroleum Association official said on Tuesday.

Chairman Phan The Rue said the association supports the finance ministry’s proposal to raise the environment protection tax and the special consumption tax on fuel products to a combined 50 percent of the retail price after the government reduces import tariffs under free trade commitments.

“It’s obvious that this should be paid for by customers," Rue told a conference in Hanoi. "If import tariffs are cut and domestic taxes are raised, the price will stay the same,” Rue said. His group represents more than 100 fuel traders in Vietnam.

The ministry has suggested doubling the ceiling for the environment tax on oil products as of January 2017 to VND8,000 ($0.35) per liter. Lawmakers are considering the proposal as part of the amended Environmental Protection Law.

Fuel is currently a major source of revenue for Vietnam’s state coffers. Import tariffs from fuel, which are paid by local businesses, now account for around 7 percent of the state's income, according to the petroleum association.

With import tariffs set to be abolished as part of free trade deals, a higher environment tax will help sustain that income, Rue said.

But some industry insiders are concerned that the tax raise will not be welcomed.